Question

Morrison Company experienced a business event that had the following effect on its accounting equation.

Assets = Liabilities + Common Stock + Retained Earnings
(25,000) = (25,000) + n/a + n/a
Which of the events would have caused this effect?
-Paid off debt
-Issued common stock for cash
-Incurred cash expense
-Paid a cash dividend

Answer 1

The event that would have caused this effect is paid off debt.

Step-by-step explanation:

In this scenario, the accounting equation Assets = Liabilities + Common Stock + Retained Earnings shows that the company's liabilities are equal to its assets, indicating that the company has paid off its debt. Therefore, the event that would have caused this effect is paid off debt.